This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

SaaS Application Use Growing as Microsoft Dominates Market

Software-as-a-service now generates $20 billion in quarterly revenues for enterprise software vendors that have SaaS applications, with Microsoft coming out on top as the market leader ahead of Salesforce, a new report finds.

Synergy Research Group’s Q2 data shows that SaaS quarterly revenues are growing 32 percent each year, and there is still a lot of runway left since less than 15 percent of enterprise software spending goes to SaaS applications. In the years to come, Synergy expects strong growth across all SaaS segments and geographic regions.

In an email to ITPro Today, Synergy Research Group chief analyst John Dinsdale said, “Growth rates will be strong across the board; but relatively speaking the highest growth rates will be in collaboration and ERP. CRM will be lower growth as the market is already relatively well penetrated by SaaS solutions. CRM was the earliest solution to be aggressively targeted by SaaS solutions, courtesy of Salesforce.”

With a SaaS market share of 17 percent and growth rate of 45 percent, Microsoft dominates in the collaboration SaaS application space, a much broader segment than customer relationship management (CRM), which is where Salesforce is focused. Interestingly, IDC forecasts that enterprise resource management (ERM) and CRM applications will see the most spending in 2018, followed by collaborative applications.

What is telling from Synergy’s data is how far behind Google is compared to Microsoft when it comes to SaaS application market share. The top five SaaS vendors in terms of market share are Microsoft, Salesforce, Adobe, Oracle and Slack. Google is in the bucket with the next ten vendors, which includes Cisco, IBM and Workday, which have an annual growth rate of 28 percent.

As the report notes, Microsoft has an existing base of customers that already use its products, so it is a matter of incentivizing them to move from on-premise software to a SaaS application.

“Legacy vendors need to create attractive and flexible service offerings that have genuine appeal to both their existing on-premise clients and to potential new clients,” Dinsdale said. “There needs to be good incentives for both customers and for vendor’s sales teams. Efforts to manipulate or to artificially lock in existing clients will not be rewarded. Legacy vendors with a large existing customer base have the opportunity to generate strong SaaS growth over a protracted period of time.”

While often talked about as a barrier to cloud adoption, security can actually be an incentive to move to SaaS models. iboss CEO Paul Martini said that he hears from enterprise clients that say moving on-premise software to SaaS is a core company initiative over the next 12 months, often led by the chief information security officer.

“The VP of IT and cloud security admins are going system by system ... if it is an email system they might go to Office 365, if it’s a sales system they might go to Salesforce,” Martini said.

Martini said that one of its customers, an auto insurance company, has made it its mission to move all of its software to SaaS over the next 12 months. The priority in the cloud migration is “whatever is easiest to get to the cloud,” he said.

If that continues to be email and collaboration tools, then Microsoft surely will hold its lead for some time.